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Monday, July 6, 2009

Liars' budget and drawings on Paulson stadium deal

An alert reader has wrested from the City of Portland a budget and a description (with some drawings) of the construction plans for the proposed remodeling of PGE Park to dedicate it exclusively to "major league" (by U.S. standards) soccer.

The documents, some of which are dated May 29, show a $36.9 million total cost for the two-phase project, but of course, there will be lots of overruns. Already legal expenses, which are in the budget at $100,000 total, have hit $250,000 and counting. Some of the items shown on the drawings are marked "not in base budget."

And to answer our question of last week, yes, Turner Construction, who did the last renovation of PGE -- luxury boxes for minor league baseball -- is shown as getting the no-bid contract on this deal as well.

Six thousand new seats, new concession stands, a new team store -- it will all be grand. Go by streetcar!

If this drawing is representative of the other additional levels of PGE Park renovations that generated the cost basis, then heaven help the citizens of Portland.

This is like the rough sketches we do during the first meetings with a perspective client to discuss a preliminary budget-like Jack's favorite Charette scenarios. This kind of information should not be the basis that a city council uses to form a contract/agreement that is expected to be presented to the taxpayers of Portland. A disaster is in the makings like the tram.

This, alone, should be a good reason for citizens to recall Adams and Leonard, for this kind of ineptitude.

It's interesting that the last page of the descriptive document with the drawings bears a legible, handrwitten date of 12/1/07. This deal has been in the works a lot longer than the public has been led to believe.

Godrey says ^ How much does the MAC pay for their members access? Is that number shown in the budgets? If it is zero, why? If it is zero, then there is the source of funding....and, it's PRIVATE funding.

That's kind of interesting to me. The stands behind any goal in any football (soccer) stadium in the world are the premo seats for the scarf wavers so LLP is giving up a huge revenue generator by having basically a horseshoe stadium.

If LLP moved the soccer pitch back into what is now some of the behind home plate seats he might be able to get a (small visitors) spectator stand under the Mac balcony.

haha, there is also the possibility of orienting the pitch's long axis east and west and moving it as far as possible to the north. This would free up a much larger area below the MAC for a deep (north to south) bleacher seating, matching the depth on the existing north side. This would increase the "good seating" far more than the above plans and increase seating by more than 1500 than proposed plan.

What is wrong with these plans? Budget overruns? That is counted for in the contingencies of any project budget. The handwritten 12/1/07 date on one of the drawings? It's public knowledge that Paulson has been trying to get an MLS team ever since he bought the Timbers/Beavers. Wouldn't it be smart to hire a firm to draw up some plans and begin to get a rough idea of what it will cost before you get in serious talks? The city's legal expenses? That's the city doing it's due diligence and is naturally outside of this project budget. Can you tell us exactly what the overruns will be? What evil plot are you trying to expose here, Jack?

Beats me, Dave. It wasn't me who had the architects call it "Acme Acme Stadium" so that no one would know what they were working on.

It's public knowledge that Paulson has been trying to get an MLS team ever since he bought the Timbers/Beavers.

But public discussion of a re-do of PGE Park at taxpayer expense started only last summer. This thing was knocking around for at least half a year at that point -- probably closer to a year.

Budget overruns? That is counted for in the contingencies of any project budget.

Yeah, there'll be a small contingency built into this one, too -- maybe 5% or 10%. But you watch. This thing will wind up costing way north of $37 million -- probably closer to $50 million. Heck, it cost $30 million in 2003 dollars just to spruce up the stadium we had, much less increase its capacity by a third or more, along with a new press box, new training facilities, etc.

If Little Lord Paulson wants to pay for all the overruns, great. But in the end, he won't. And he's got Sam and Randy "driving a hard bargain" with him, and so you know the city is about to get the shaft.

It wasn't me who had the architects call it "Acme Acme Stadium" so that no one would know what they were working on.

Wouldn't you suppose that a generic name was on the plan to differentiate from other potential plans? You're reaching here, Jack.

But public discussion of a re-do of PGE Park at taxpayer expense started only last summer. This thing was knocking around for at least half a year at that point -- probably closer to a year.

Of course it was... Shouldn't MP get his estimates together before he takes it to the public forum? Also, the deadline to file a petition for the MLS franchise was in Fall 2008, so naturally, the discussion would not have come up until then.

The entire premise of the financing is that the MLS team will generate the revenues to repay the bonds. Have you taken a look at what Seattle is doing? 33,000 per game plus a season ticket waiting list of 10,000. With 17 league matches per year (18 MLS teams in 2011), along with big-name international friendlies, US Open Cup, the possibilities of SuperLiga and CONCACAF Champions League... Plus, you've got the largest grassroots soccer supporter group of any US-based soccer club, and the team is still only in the second level of the North American soccer hierarchy? Sounds like a winner to me!

Yeah, there'll be a small contingency built into this one, too -- maybe 5% or 10%. But you watch. This thing will wind up costing way north of $37 million -- probably closer to $50 million. Heck, it cost $30 million in 2003 dollars just to spruce up the stadium we had, much less increase its capacity by a third or more, along with a new press box, new training facilities, etc.

The previous "sprucing" of PGE Park was a complete retrofitting of the entire stadium along with adding luxury boxes. All that is going on with the current plans in debate is adding some stands and a couple rooms. I'm not an architect or a contractor, but $37MM seems about right.

If Little Lord Paulson wants to pay for all the overruns, great. But in the end, he won't.

What basis do you have to make a statement like this? You are only assuming, and that seems to be the best you are able to do. Plus, your name-calling only diminishes your credibility.

Have you taken a look at what Seattle is doing? 33,000 per game plus a season ticket waiting list of 10,000. With 17 league matches per year (18 MLS teams in 2011), along with big-name international friendlies, US Open Cup, the possibilities of SuperLiga and CONCACAF Champions League... Plus, you've got the largest grassroots soccer supporter group of any US-based soccer club, and the team is still only in the second level of the North American soccer hierarchy? Sounds like a winner to me!

The debt service on $40 million at 6% over 30 years is around $3 million a year. If LLP can pay all his expenses, pay that debt service, give his investors (dad and the boys) a return, and keep it up for 30 years, this will work. But at 20 events a year, that's around $150,000 per game just for the mortgage. And so the first 5,000 to 8,000 paying fans per game will pay the mortgage. Is there enough fan demand to cover everything else? I don't know, but I doubt it.

The Seattle story is wonderful, but they'll never make those numbers down here. They'll be lucky to sell 15,000 a game.

I'm not an architect or a contractor, but $37MM seems about right.

Impressive. I hope the city gets Paulson to pay every single penny above that. But I have zero confidence in the city's ability to get him to do that. They've fallen for one harebrained development fiasco after another, and this one is the latest on the list. History overwhelmingly supports my misgivings.

The "reach" here is by the people who think the city will suddenly develop the smarts to break even on sports. It hasn't happened in the 31 years I have lived here, and I sincerely doubt it's going to start happening now.

We'll kill Portland professional baseball for this, incur huge "urban renewal" debt, and then watch the team and the league implode within a decade. Then we'll have two mortgages to pay -- this one and the one we ran up to do the minor league luxury boxes -- out of property taxes.

OK, name me one public-private partnership paying its dues:
1) PFE bailed on PGE park after 1 year and we got stuck
2) Nines hotel isn't paying after 2 years and we got stuck
3) Armory Theater - PCS isn't paying its loan back and we got stuck.

Samdy is using other people's (taxpayer) money and really doesn't have any motivation to get it paid back.

Paulson can do it whenever he wants. The city commissioners shouldn't agree to anything behind closed doors before the public hears about it, however -- and I'll bet that's what happened here. Once you see Don Mazziotti in the picture, you know there's a backroom deal being done. Plus, why the "Acme" bit? Something not kosher there.

This PUBLIC money we are talking about spending here folks. Therefore ALL discussions should be public and explicit and extensive.
The private sector developers should be required to back up their promises of repayment with iron clad contracts, not the current b/s that is floating around.
For those who want a dedicated soccer stadium...fine...pay for it yourselves; not with my tax dollars!

Is there any agreement in these documents? Looks to me like this is Paulson's initial pitch to the city. Which appears to have been in late May 2008. The announcement to go pursue the plan was made Sept 3, 2008. How should he have pitched this to the city differently?

Any business model that relies on public money to make ends meet and earn a profit is, by my definition, "crappy." Isn't the point of having a PRIVATE sector to make money for the PRIVATE investors who bear the risks?

When the City antes up the money via loans or bonds or hand-outs, but doesn't get any of the return, that is not a business deal, it is a ____ job (family blog, but use your imagination). And sorry, but "putting Portland on the world's map" is not a legitimate return if the attraction is a two-bit soccer team. Don't people know that you can't buy culture.

"The city would be taking out bonds to borrow the money and the revenues from the soccer team would be used to repay those bonds." and the tooth fairy gave me a quarter when I lost a tooth...
Contrary to popular belief bonds are not free money. Also to those that say the deal is risk free to the city are WRONG. The bond indenture will list the City of Portland,not MP.

In Steve's listing of PFE, Nines Hotel, Armory, all three used taxpayer backed bonds.

Then John Boy writes "crappy business models" for each. John Boy, you must not have attended the public hearings for each of these, whereby City Council on down to city staff said they are "well executed business plans", just like two and possibly three commissioners are telling us now concerning PGE Park.

Now add to this list 1) the Creative Center, now broke and became the PDC headquarters; 2) The Port of Portland Testing Center at PDX, broke; Convention Center, broke; The Schnitz and adjoining Theater Building, broke........keep adding.

The slippery slope analogy seems more appropriate than it's all roses.

Well, that's for sure. Anything built recently is going to have its property taxes lowered, not increased. From those, instead of "tax increment financing," we will have, as my friend Bill McDonald puts it, "tax excrement financing."

This is just a sidebar, but I've always wonderered about it. The MAC club has what amounts to the best skybox view of whatever is going on in PGE Park. Is it going to be less expensive to pay for a year's membership to the MAC club (with all the attendant perks) than to pay for a season ticket with equivalent view (skybox or other) in the newly refurbished PGE Park?

Well, that's for sure. Anything built recently is going to have its property taxes lowered, not increased.

I believe new properties come onto the tax rolls not at real market value but at the average of the assessed value/real market value ratio in the area. Before the dip, many residential properties' AV was 50-60% of RMV, so new properties were coming onto the rolls at that same level. Even with the dip in property value of 15 - 20%, most people are still well above AV, meaning your taxes will increase the maximum statutory amount of 3%.

Commercial property is different, and lots of commercial property has AV closer to RMV. They might reach the tipping point sooner. Still, the unintended consequence of M5 and M50 is property tax stability during the worst housing bubble in our lifetimes. Phoenix and Las Vegas, not so much.

I can't wait until 2041, when the bonds are paid off -- that will be about 25 years after the league folds.

Ahh...yes...this saying again. I've heard it since the day they kicked off MLS ...in 1993. Every soccer hater in the country uses it. I know its hard to accept as an American...but its here and its not going anywhere.

Considering the way things are going MLB might implode before MLS does what with how the league is structured so that if one of the NY teams, the Dodgers, the Cubs and Boston aren't in the World Series the ratings are bunk and they make nothing on merch sales...yet by following this business strategy they're killing baseball because nobody outside of those cities cares about baseball. Once in a while there is a fluke run like Tampa Bay. Other than that people in towns like KC or San Diego just stop caring about baseball.

Puh-leeze, save your BS. The only way that the 11 out of 14 franchises losing money are surviving is by the fee kickback that they split up amongst the originals. The only way money-losers are worth anything is if someone offers to buy them and I am not seeing the resale market for MLS franchises at all.

It's a Ponzi scheme pure and simple. Each round escalates the prices until we get some really desperate like Oklahoma City to buy the final franchise.